Wanted to know and understand the reality behind the terms and conditions that new startups puts while promising ESOPs at the time of joining.
Please share ur experience so that everyone gets aware.
99% of the time they will not amount to anything.
Gains are taxable, income taxes when exercising (option → share), and capital gains when redeeming those shares. Sometimes they'll do a "buyback" to file taxes for exercise (e.g. you get 70 vested shares from 100 options after tax). This applies to companies based in India. If you get shares in a foreign company, the rules for these change accordingly.
Make sure the vested options can be exercised even after you leave, sometimes the conditions will have a clause to exercise within a few days of leaving.
Back-loaded (e.g. end of entire year, or a split like 10-20-30-40) vesting plans incentivise your "exit" before majority of shares could be vested. Sometimes they start vesting only after you've completed a few months — so if you leave a year and few months later, you don't get anything!
Also ESOPs do not give you any "real ownership" no matter what the org sells, the shares when exercised are the lowest tier - non voting, later exit. Seed/Angel/VCs will always get preferential right to sell/vote.
Someone please give some advice on how can one negotiate ESOPs? How to negotiate vesting period (if possible)? How to sell ESOPs? Can you sell ESOPs after you leave the company?
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I’m considering joining as a founding engineer at an early stage startup who is just about to sign a $4M seed round.
They offered to match my current base and a $20,000 in ESOPs.
When joining at such early stage companies, how should ...
